Mark Nelson, the co-founder and chair of $12 billion hedge fund Caledonia, is the only Australian who is part of an informal group of finance minds dubbed “the breakfast club” that chat once a week to share their thoughts on the world.
The breakfast club includes legendary investor Charlie Munger, the trusted sidekick of Warren Buffett. Mr Munger has served on the board of Berkshire Hathaway since 1978, during which time the company has grown its assets from $US220 million to $US460 billion.
Dr Nelson, who has known the investment legend for 25 years, says he “plucked up the courage” to ask Mr Munger to be the headline act of this year’s Sohn Hearts & Minds Investment Leaders charity conference.
Mr Munger, who turns 98 years on New Year’s Day, agreed to the rare appearance to support the annual event, which has raised over $30 million for medical research.
“This is like a world first: Charlie doesn’t do these sorts of things,” said investment banker Matthew Grounds, who with Guy Fowler and Gary Weiss created the Sohn Hearts & Minds event back in 2016.
Mr Munger is feted for his sharp wit and wisdom. He also convinced his long time investing partner Warren Buffett, whom he met in 1959, to turn his attention away from cheap, overlooked “so-called cigar-butt stocks” and towards strong companies that would never have to be sold.
“What Charlie did is recognise the importance of not having to sell and owning something that can keep growing,” said Dr Nelson.
“What sort of company can keep growing – those with moats and pricing power and those that increase their incremental return on capital.”
He convinced Mr Buffett that a fairly valued company that can keep growing “will look cheap in the future”.
Mr Munger’s live interview comes at a pivotal time for money managers.
“There’s more disruption and widespread disruption that’s going to take place,” Mr Grounds said. “That’s going to be really interesting across a whole bunch of sectors.” Mr Grounds is watching the UK energy crisis closely.
But Mr Fowler – who with Mr Grounds last year launched a new investment bank, Barrenjoey – said confidence in Australian boardrooms remained strong.
“Clearly everyone put everything on pause at the beginning of the pandemic because they didn’t know if the world was about to end [but] the world hasn’t ended,” Mr Fowler said.
“You see a lot of activity in the high cashflow sectors – infrastructure, real estate and so forth because of lower interest rates – but generally, it’s pretty positive markets.”
He said there was clear excitement about “the reopening trade”.
“Savings rates are up, people have a lot of money to spend and there’s a built-up expectation that there’s going to be a big retail boom for the next six months,” Mr Fowler said.
Mr Munger joins other investment titans Bill Ackman, Ray Dalio and Howard Marks in donating their pulling power and insights to raise money for medical research via the Sohn Hearts & Minds event, which is now in its fifth year and has raised over $30 million for various charities.
This year’s event takes place on December 3. It will once again be held virtually as the COVID-19 pandemic has restricted travel to Australia, which has led organisers to price tickets at $500, a fraction of the standard $3500 live event price.
Hobart was due to host the 2020 event and is on schedule to host the event in 2022.
Mr Grounds says the tremendous success of Hearts & Minds Investments, the ASX-listed fund which has grown to $1 billion, has alleviated some pressure associated with conference ticket sales and sponsorships to achieve its targets during the pandemic.
HM1 donates 1.5 per cent of its net assets to charity, which will provide a $15 million annual windfall to the charities at its current size.
Hearts & Minds Investments, or HM1, has not only been a top performer among ASX listed funds but has also traded at or close to the value of its assets, sidestepping the discount problem that has plagued the listed fund sector.
The chairman of HM1, Chris Cuffe, said the pandemic had caused more people to consider a “career in science” and there was more funding for medical research either via governments or through organisations such as Hearts & Minds.
In addition to Mr Munger, a handful of presenters has been revealed by the conference organisers, with more to be unveiled in the lead up to the event.
Eleanor Swanson of Sydney-based fund manager Firetrail is presenting for the first time while Jay Kahn from Flight Deck and Yen Liow of Aravt are also debuting.
Babak Poushanchi of Cota Capital, Beeneet Kothari of Tekne, Qiao Ma of Cooper Investors are returning after their picks delivered strong returns.
“If ever there was a confluence of investment and medical research, it has been in the last 18 months,” says Mr Grounds
“We’ll have content in the conference which will be relevant for this moment.”
Charities associated with Sohn Hearts & Minds are: The Florey Institute of Neuroscience & Mental Health; Victor Chang Cardiac Research Institute; Black Dog Institute; Brain Cancer Collective; Murdoch Children’s Research Institute; MS Research Australia; Shake It Up; Macquarie University Centre for Motor Neuron Disease Research; JDRF; RPA Green Light Institute; and the Children’s Hospital of Westmead.
This article was originally posted by The AFR here.
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